Quarterly Results

Solar companies perform better than those in the wind space

Most of the listed renewable energy companies have released their financial results for the quarter ended December 2017. While the results vary by company, a common trend is that companies operating in the solar power development space are performing much better than those in the wind power space, a trend that may change with the government now focusing on wind power development. Renewable Watch takes a look at financial results of select listed renewable energy companies for the quarter ended December 2017 and compares the same with the results reported in the corresponding quarter in 2016-17.

Suzlon Energy

Suzlon Energy Limited (SEL) reported a 33 per cent decline in consolidated revenues in the quarter ended December 2017, over the corresponding period in the previous year. Its total income from operations for the reporting quarter stood at Rs 22,373.7 million compared to Rs 33,484.1 million in the quarter ended December 2016. As a result, SEL incurred a consolidated net loss of Rs 326.8 million, as compared to the net profit of Rs 2,825.4 million in the corresponding period in 2016-17. The losses can primarily be attributed to a 55.4 per cent year-on-year decline in sales in the wind turbine generator segment. The segment recorded sales of Rs 13,370 million in the reporting period. The company delivered 316 MW of projects in the reporting quarter. Meanwhile, raw material cost as a proportion to sales increased from 56 per cent in the quarter ended December 2016 to 68.4 per cent in the quarter ended December 2017.

With the introduction of the competitive bidding regime in the wind segment in 2017, Suzlon is expecting an increased growth. Recently, the company received an order to supply wind turbines aggregating 96.6 MW of capacity for ReNew Power’s wind power plant in Karnataka. As of December 2017, its order backlog stood at 1,132 MW including 455 MW of frame agreements backed by advance, and for which power purchase agreements have been signed, but with a pending ratification.

Inox Wind Limited

Inox Wind reported dismal results for the quarter ended December 2017, on account of the ongoing transition to the auction regime in the Indian wind power segment. The wind power manufacturer closed the quarter with a revenue of Rs 909.3 million, a 92 per cent decline from the revenue registered in the corresponding period last year. As a result, it incurred a net loss of Rs 432.7 million in the reporting quarter, as compared to Rs 1,165.6 million profit that it registered in the corresponding period in 2016-17.

Inox spent an amount of Rs 6,974.4 million of its Rs 7,000 million initial public offering proceeds (from 2015) as of December 2017. The funds were used towards the expansion and upgradation of its facilities, working capital requirements, transmission infrastructure development and general corporate purposes. The unspent amount of Rs 49.9 million is being kept in fixed deposits in banks. Reportedly, Inox recently signed a contract with Adani Green Energy to develop a 100 MW capacity wind power project in Kutch, Gujarat. Moreover, in November 2017, the company signed a power sale agreement (PSA) with the Solar Energy Corporation of India for developing 250 MW wind capacity at a tariff of Rs 2.64 per kWh.

Orient Green Power Limited

After a long time, Orient Green Power Limited (OGPL) posted better results, though overall, it continues to be in the red. Its consolidated total income rose 4.3 per cent from Rs 558.69 million in the quarter ended December 2016 to Rs 582.51 million in the quarter ended December 2017. Its consolidated net loss, therefore, declined by 27 per cent from Rs 696.6 million in the quarter ended December 2016 to Rs 510.8 million during the quarter ended December 2017.

OGPL is an independent operator and developer of renewable energy power plants in India. Until December, its portfolio included biomass, biogas, wind energy and small hydroelectric projects at various stages of development. However, with its large biomass-based power project portfolio taking a toll on its performance, OGPL decided to divest it during the reporting quarter. The company disinvested its eight biomass subsidiaries to Janati Bio Power with effect from December 31, 2017 at a price of Rs 490 million. Janati Bio Power is a subsidiary of Shriram Ventures Limited, which is a promoter company of OGPL.

Other key factors for an improved performance during the quarter ended December 2017 were the structural improvements in the wind business (grid availability of 95 per cent in Tamil Nadu), sharp reduction in finance costs and a significant increase in the renewable energy certificates trading in November and December 2017.

Azure Power

Azure Power, which is listed on the New York Stock Exchange, reported a revenue of Rs 1,739.9 million for the quarter ended December 2017, which is an 83 per cent growth over the revenues reported for the quarter ended December 2016. The increase in revenue was driven by the commissioning of new projects. The company closed the quarter at an installed operational capacity of 805 MW, an increase of 57 per cent over the capacity as of December 2016.

The company incurred a consolidated net loss of Rs 136.1 million in the reporting quarter as compared to a net loss of Rs 514.3 million for the quarter ended December 2016. The cost of operations in the quarter ended December 31, 2017 increased by 90 per cent to Rs 158.4 million from Rs 83.2 million in the same period in 2016. The increase was primarily due to plant maintenance cost for the newly commissioned projects, which was partially offset by the implementation of improved operations and maintenance methods, which improved plant productivity.

Its adjusted earnings before interest, tax, depreciation and amortisation was Rs 1,226.9 million for the quarter ended December 2017, compared to Rs 696.4 million in the quarter ended December 2016. The increase was primarily due to the increase in revenue during the period.

Being a New York-listed company, foreign currency exchange rates also impact the company’s financials significantly. In the quarter ended December 2017, Azure Power gained Rs 90.8 million on foreign exchange, compared to a loss of Rs 135.6 million during the corresponding period in 2016-17. As of December 2017, the company had a committed capacity of 1,580 MW. It is likely to close 2017-18 at a capacity of 905 MW-1,000 MW, as commissioning of two of its ongoing projects – a 40 MW project in Uttar Pradesh and a 50 MW project in Andhra Pradesh – will be delayed due to issues pertaining to transmission interconnections to be provided by the respective state governments. For 2018-19, the company has a guidance to have 1,300 MW – 1,400 MW operational capacity, a 30-55 per cent year-on-year increase.

Indosolar

Indosolar generated revenues of Rs 522.43 million in the quarter ended December 2017, as against Rs 1,279.93 million recorded in the quarter ended December 2016. Its profit increased by 500 per cent to Rs 920.51 million in the quarter ended December 2017, over the corresponding quarter. The company had been incurring losses as a result of the lower demand for Indian modules due to cost constraints. Thus, the one-time settlement (OTS) is expected to help the company turn around its business. In addition, considering the expected imposition of safeguard/anti-dumping duty, Indosolar is planning to commence the commercial production of its “Line-C” soon, which is under installation.

In October 2017, the Union Bank of India approved Indosolar’s proposal of OTS for a debt outstanding for over nine years. The proposal has two debt components. The serviceable debt component will be paid within the next six years, whereas the non-serviceable debt component will be converted into optionally convertible cumulative redeemable preference shares that are redeemable in 16 quarterly instalments, commencing from June 30, 2024 and ending on March 31, 2028. As on December 31, 2017, the company’s current liabilities exceeded its current assets by Rs 8,273.24 million, with its long-term borrowings having been classified as current liabilities.

Conclusion

Summing up, except Azure Power, none of the aforementioned companies have shown consistent improvement in their financial performance. This can be primarily because Azure Power is concentrating on developing its solar project portfolio, while OGPL, Inox Wind and Suzlon are wind-focused players. Suzlon has only recently started diversifying into the solar power space, which is witnessing the maximum growth amongst all renewable energy segments. As far as Indosolar is concerned, its future financials will be dependent on how successfully it is able to conclude its debt restructuring programme.